Govt to lease railroad engines, wagons to int'l bidders

The plan to open the market of Finnish railroad passenger services took a step ahead on Tuesday as Anne Berner, the minister for transport and communication, announced details of the plan to split the state-owned railroad company VR.

The ministry will establish a railroad wagon and equipment company under which VR engines and wagons would be transferred to the company and then be available for possible competitors to lease.

VR will continue in the railroad business as it does currently, but with these arrangements it will not have a competitive edge over any new arrivals to the market. It will have to submit tenders for operational licences in competition with other interested parties.

The establishment of the rental system was chosen as interested foreign transport companies apparently all said that purchasing Finnish width engines and wagons would not be worth their while.

The Finnish railroad width is wider than in the rest of Western Europe. In continental Europe, railroad operators can transfer equipment from one country to another, but equipment from the continent is inoperable in Finland.

The governmental plan has met strong criticism from the opposition. However, the decision does not require parliamentary approval as the affairs of state-owned corporations are not subject to parliamentary control, rather, ministries can take decisions. The plan was approved by Cabinet in April.

Critics say the new state-owned engine company will have to invest in more engines as a flexible use of engines is no longer possible. VR uses currently the same engines for freight and passenger trains, but that synergy is not feasible in the commercial environment as passenger and rail services are separate.

Critics also say the would-be arrivals probably want their engines to be painted in their colors and that will further increase inflexibility.

Berner said in press release on Tuesday that "several international railroad operators" had expressed interest in coming to Finland and that competition would reduce ticket prices.

Railroad tickets have already become cheaper in Finland due to competition from long-haul bus services, following the arrival of a British-owned long haul company in 2014.

Critics say the added costs of competition are likely to make railroad travel more expensive. VR would be less profitable and therefore provide lower dividends to the state. Meanwhile, railroad employees are concerned about a possible drop in salary.

A Finnish language newspaper Kansan Uutiset wrote over the weekend that the railway company split is an ideological choice by the government.

"It looks like the government is willing to pay extra for opening up the railroads for competition," it wrote.